Government welcomes investment agreement

Govt welcomes investment
agreement

A new Investment Protocol
under the Closer Economic Relations (CER) trade agreement
further strengthens the investment relationship between
Australia and New Zealand, Finance Minister Bill English
says.

Australian Prime Minister Julia Gillard and
New Zealand Prime Minister John Key signed the Investment
Protocol in Wellington today.

"New Zealand and
Australia have one of the most open bilateral economic and
trade relationships of any two countries. This relationship
is underpinned by CER, which is the oldest and most
comprehensive set of trade access arrangements that either
country enjoys," Mr English says.

"The Investment
Protocol builds on existing goods and services agreements,
and aligns CER with other modern, high-quality free trade
agreements.

"Australia is both the single largest
source of direct foreign investment in New Zealand and is
the largest overseas destination for New Zealand investment.

"The addition of investment to CER will cut red
tape and compliance costs for investors on both sides of the
Tasman."

Under the Investment Protocol, Australian
and New Zealand investors will benefit from increases in the
screening thresholds above which foreign investments in
business assets require regulatory approval.

For
New Zealand firms investing in Australia, the screening
threshold will increase from A$231 million to A$1.005
billion. For Australian firms investing here, the threshold
will increase from NZ$100 million to NZ$477 million. These
thresholds will be updated annually based on changes in GDP.

The increased screening thresholds apply only to
investments in significant business assets. The screening
thresholds for investments in sensitive land and fishing
quota are unchanged.

Further information about the
Investment Protocol, including the full text, and CER is
available on the website of the Ministry for Foreign Affairs
and Trade at www.mfat.govt.nz.

Closer Economic
Relations Investment Protocol - Q&A

What are the
main advantages of the Protocol?Once in force, the
Protocol will mean that New Zealand investors seeking to
invest in Australian business assets will:

• Be
able to make larger investments before they hit the monetary
screening threshold and are required to seek investment
approval from Australia’s Foreign Investment Review Board
(FIRB). • Be treated equally as well as Australian
investors and at least as well as any other foreign
investors. (Any exceptions to this have been clearly
specified in the Protocol);• Have more certainty that
their investments will be protected and will not be treated
unfairly. What are the new screening
thresholds?The new screening threshold for New
Zealanders investing in business assets in Australia will
increase to A$1.005 billion (up from A$231 billion). The new
threshold for Australians investing in significant business
assets in New Zealand will increase from NZ$100 million to
NZ$477 million. Are Australian investors
currently subject to the same rules under the Overseas
Investment Act as other foreign investors?Yes, Australian investors are currently subject to
the same rules as all other investors. That will continue to
be the case. However, once the Protocol takes effect,
Australian firms will enjoy a higher monetary screening
threshold for investments in “significant business
assets” than other foreign investors.

What are
investments in 'significant business assets'?They
are non-land investments, such as shares, plant and
equipment, which involve a 25 per cent or more ownership
stake in business assets worth NZ$100 million or more. Once
the Protocol takes effect the screening threshold will move
to NZ$477 million. For example a NZ$125 million investment
in a NZ$500 million company would require approval, as the
investment crosses the 25 per cent ownership threshold in a
company worth more than NZ$477 million. Does the Investment Protocol affect investments
in sensitive land or fishing quota? No. Australian
investors face the same rules as everyone else under those
categories. In addition, if an overseas investor wishes to
invest in a significant business asset that also includes
sensitive land and/or fishing quota, the investment must be
screened.

Will the most-favoured-nation provisions in
the FTAs that New Zealand has with other countries mean that
investors from those other countries will also be entitled
to the benefits of the Protocol? No. All of our FTAs
include provisions that mean that we are not obliged to
extend most-favoured-nation treatment with respect to
obligations included in pre-existing FTAs. Because the
Investment Protocol forms part of the CER arrangements, New
Zealand’s very first comprehensive FTA, it is covered by
this protection.

When do the Protocol and new
screening thresholds come into effect? Once
Australia and New Zealand have both completed processes to
establish the changes in legislation or
regulation.

Does this mean that New Zealand can’t
introduce any policies that might affect Australian
investors in New Zealand business assets?No.
Provisions in the Protocol preserve New Zealand’s ability
to take measures that could affect investors for a range of
purposes. These include fulfilling obligations under the
Treaty of Waitangi, to protect human, animal or plant life
or health, or to manage a balance of payments crisis. In
addition, we retain flexibility to adjust the criteria and
factors - under existing investment categories - that must
be taken into account when we look at investment
applications.

Will the Protocol make it easier for
Australian investors to buy New Zealand State Owned
Enterprises, if the Government adopts a mixed-ownership
model for certain SOEs? In line with the tests set
out by the Prime Minister in his first speech of the year,
the Protocol includes a specific provision which preserves
the right of the Government to give preference to New
Zealanders with respect to any share sales in SOEs
[Reservation II-NZ-4].

When was the Protocol
negotiated?Negotiations were announced in February
2005 (by then Finance Minister Michael Cullen and then
Australian Treasurer Peter Costello) and were concluded in
June 2010.

Where can I find the text of the
Protocol and additional information about the
Protocol?The full text of the Protocol will be
available on the website of the Ministry of Foreign Affairs
and Trade, www.mfat.govt.nz. Copies of a brochure
providing an overview of the Protocol, and the National
Interest Analysis of the Protocol are also available on the
MFAT website.

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